Last.fm struggles for streaming, international revenue

Last.fm is struggling to generate revenue in some parts of the world, so a …

Music streaming community Last.fm has made some important changes to its services with the intention of generating revenue. The struggling ad market has forced the CBS subsidiary to require subscriptions in many international markets, and streaming to third-party apps is now being restricted to subscribers. The honeymoon of "free" streaming music appears to be ending.

As announced on Last.fm's blog, the company will soon require most international users to purchase a monthly subscription to use Last.fm Radio. Users in the US, UK, and Germany are excluded, but all others will need to begin paying �3.00 per month on Monday, March 30 if they hope to keep rocking out. Last.fm boasts a global user base of 30 million monthly users (double what it was just a year ago) and, as you might guess, many of them have already expressed dissatisfaction over no longer having free access to the company's seven million tracks.

Last.fm used its forums to let users know that the company is also changing the rules for third-party streaming apps. First, only subscribers will be able to stream music via these apps unless developers negotiate something directly with Last.fm. The obvious justification for this rule is that the company "need[s] to get the money to cover royalties," the forum post reads.

The second new rule for third-party apps is that they will not be able to stream to mobile phones or, perhaps more accurately in this 21st-century gadget landscape, over cellular networks. Last.fm blames this on limitations in its licensing agreements, though it may be able to "make an exception" if developers plead their case. But, unless those developers act fast, unofficial apps for Windows Mobile, Symbian, and BlackBerry will stop working next week. Last.fm's official clients for iPhone and Android will reportedly continue to work without requiring a subscription.

Third-party apps that allow users to "scrobble" (or share, in mundane English) information with Last.fm about music played in various media players will "always be free," and this is no surprise. Collecting information about community and user behavior is a business model in and of itself for companies like Last.fm.

Naturally, all manner of complaints have been lodged in the comment threads, with many saying that Last.fm has sold out and willingly destroyed "thousands of free development hours." On the road to generating revenue out of a "free" service, though, these bridges sometimes need to get burned. Since CBS acquired Last.fm for $280 million in 2007, it has been looking for a way to boost the music streaming community's profitability. In December, 20 percent of Last.fm's staff was let go. While the company does not elaborate how its users are distributed, its US and UK operations are presumably still generating enough revenue (via ads and optional subscriptions) to avoid imposing this requirement—at least for now.

Licensing seven million tracks is no small financial feat. Even Pandora, a streaming music competitor, took a page from traditional radio's book in January this year and introduced ads that run in between songs. All things considered, it may simply be time for costly Web services to start exploring other business models more aggressively.